In recent days , Bitcoins have enjoyed a media buzz as the value of one Bitcoin jumped on several Bitcoin exchanges to more than $ 200 per Bitcoin . But by Wednesday , it fell to $ 105 .

Bitcoins are an attempt at creating an electronic currency that is beyond the control of any government . They are created through a digital mining system , in which digital `` miners '' are granted Bitcoins by using their computers to do computations that verify Bitcoin transactions . Pretty clever .

With allegedly strict rules on the creation of Bitcoins , the money supply is limited . Theoretically , no government can water down the Bitcoin with any type of quantitative easing . As a result , Bitcoins seem to present the best of all possible worlds -- the convenience of modern digital payment technology and the stability of a fixed money supply .

Fearmongers point out that banks are no longer safe as government authorities in the European Union have signaled their willingness to confiscate funds from even insured depositors . Those fearing the collapse of their local currency or their local banking system wo n't have to lug around hunks of metal as a way to store their wealth . Why not turn to Bitcoins ?

The near anonymity built into the Bitcoin system keeps funds away from the prying eyes of tax collectors , who are getting ever better at shutting down tax havens . This potential for anonymity makes the currency ideal for drug smugglers , terrorists and money launderers , as well as the merely paranoid .

So are Bitcoins the currency of the future ? I think not .

No one really knows who is really behind Bitcoins , as the creator is just a pseudonym Satoshi Nakamoto . That in itself should be a huge red flag . I would certainly not trust my life savings to some mysterious computer algorithm created by shadowy anonymous characters in a system that attracts underworld types .

One of the self-proclaimed largest Bitcoin exchanges is Mt. Gox . The name originally stood for Magic : The Gathering Exchange , an online site designed to trade cards used in playing the card game popular with the younger set . An exchange based on trading kiddy cards does not seem like a sound foundation for a monetary system .

There is no government regulating participants in the system to prevent fraud and abuse . I would not be surprised if the Bitcoin mining software becomes a magnet for computer viruses . After all , the tax evaders , drug dealers and terrorists attracted to Bitcoin would not be likely to cooperate with authorities when they have been hacked and robbed .

It would be close to the perfect crime to create a pseudomonetary system that rips off other evildoers . Just be careful when the bad guys find out where you live .

Even if the system is not one big scam designed to enrich its shadowy creators , it can be hacked and can break like any technology . The authorities wo n't be too eager to help out Bitcoin-based financial enterprises when they get in trouble , just as they were all too eager to punish the depositors of the Cyprus banks storing questionable funds from Russian oligarchs .

Rather than being a safe place to keep money , the exchange rate of Bitcoins relative to other global currencies has fluctuated wildly . The recent jumps on price give all of the impression of being a bubble that could soon pop . If Bitcoin ever could establish itself as a legitimate payment scheme , which I doubt , it 's hard to tell what the appropriate exchange rates should be with respect to other currencies .

Bitcoins are not the first attempt to create digital money . Other ventures , such as Cybercash , have come and gone , as well as various attempts to create local currencies . Governments do n't like the competition . Managing a currency is a very profitable activity for governments , and they depend on seignorage -- the profit stemming from printing money -- in various degrees to cover budget deficits .

Indeed , one can always pay the troops by printing more almost worthless money , as the U.S. did in the American Revolution and Robert Mugabe did in Zimbabwe . One can expect governments to throw up legal roadblocks to prevent such competition from cutting into the lucrative business of printing money .

Moreover , it would not be good for the global economic system to have a totally fixed money supply . A growing economy needs a money supply that grows at the same rate to keep prices stable . Much as we love to criticize the governmental entities that control the monetary system , it does help to have some human judgment -LRB- armed with a checkbook -RRB- involved to deal with crises .

Our banking system is as safe as it is because there are lenders of last resort who can create more money in a crisis to protect the entire system from collapsing in a liquidity crisis . Iceland and Cyprus have discovered how painful it is to have a banking system without such a deep pocket lender of last resort .

A financial system based on Bitcoins would have no possibility of there being such a backstop . In short , Bitcoins look like quite a bit of trouble .

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Bitcoins have enjoyed a media buzz as the value of one Bitcoin jumped as high as $ 200

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James Angel : Bitcoins are an attempt to create an electronic currency

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He says even if the system is not one big scam , it can be hacked like any technology

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Angel : The currency is ideal for drug smugglers , terrorists and money launderers